The firm is financed with both equity and debt. The firm has 500,000 shares outstanding priced at $7 per share. The firm’s beta is 1.2. The risk-free rate is 2.1% and the expected return on the market is 13% next year. The face value of the firm’s debt is $1,500,000 (with the par value of $1,000), which is currently quoted at 98. The coupon rate is 7%, with the coupons paid semiannually. The bonds have 12 years left to maturity. The tax rate is 21%.

Required

The capital structure weight of equity is _________ % and that of debt is ________%.

Answer rating: 100% (QA)

Market value of equity 500000 73500000 Mark... View the full answer